Question

Return to ques Exercise 22-8 Departmental income statement and contribution to overhead LO P3 10 Jansen Company reports the following for its ski department for the year 2019. All of its costs are direct, except as noted. points Sales Cost of goods sold Salaries Utilities Depreciation office expenses $610,000 445,000 115,000 ($25,600 is indirect) 17,800 ($5,900 is indirect) 50,000 ($17,500 is indirect) 29,200 (all indirect) 1. Prepare a departmental income statement for 2019. 2. & 3. Prepare a departmental contribution to overhead report for 2019. Based on these two performance reports, should Jansen eliminate the ski department?

Answer 1

Income statement
		Amount
Sales		$       610,000
Less: Cost of Goods Sold		$       445,000
Gross profit		$       165,000
Less: Operating Expenses
Salaries	$         (115,000)
Utilities	$           (17,800)
Depreciation	$           (50,000)
Office expense	$           (29,200)
Total Expenses	$         (212,000)	$      (212,000)
operating loss		$        (47,000)

Department Contribution to overhead December 31, 2019
		Amount
Sales		$       610,000
Less: Cost of Goods Sold		$       445,000
Gross profit		$       165,000
Less: Direct Expenses (Total Expenses less Indirect expenses)
Salaries	$           (89,400)
Utilities	$           (11,900)
Depreciation	$           (32,500)
Total Expenses	$         (133,800)	$      (133,800)
contribution yo overhead		$         31,200
Should Jansen eliminate the ski Department		No

No, Because department contribution to overhead is shows positive contribution (profitable).